As we discussed in The Key to Agility (Part 1) the development of modular enterprise resource planning (ERP), coupled with the shift to cloud-based solutions, has created opportunities for organizations to develop greater agility and resilience. A cloud-based modular ERP gives companies the ability not only to pivot during times of unexpected turbulence, but also to approach their businesses with a more open mind; they can achieve agility, resilience, as well as opportunity.
Sounds great, right? But, as it is with the adoption of any new system, there are upsides and downsides to making this change. So, agility resilience and opportunity aside, let's consider the potential advantages and disadvantages of modular ERP adoption.
Advantages
Making a wholesale change to your company’s ERP is a daunting task. It comes with business and organizational risks, consistent with any major undertaking. You also risk pushback from your end users whose adoption of your new ERP is critical to its success.
Phased implementation and adoption
Two key advantages of a modular ERP are its phased implementation and its phased user adoption. By approaching your ERP modernization using a step-by-step approach, you can provide proof of concept to the rest of your business and cultivate internal champions in the process.
Scaling to meet market opportunities
Scalability is on everyone’s checklist of desirable technology attributes — and with good reason. As we learned during the pandemic, a dynamic marketplace uncovers new opportunities and those that can take advantage of them fastest can gain real competitive advantage.
Companies need to grow to meet these opportunities and they don’t want their technology to become a hinderance. Modular ERPs are purpose-built to have "modules" added to them as needed, without having to redevelop the underlying structure of their foundational systems.
Faster time to value
Faster implementation times and faster time to value are also high on companies' checklists for a successful ERP. Modular ERP can do more to reach these goals relative to other systems. After implementing the initial module or structure of a modular ERP, the benefits are twofold:
1. As your need for additional functionality grows and evolves, you can implement a new module to meet virtually any of those needs.
2. With each new module, you don't need to implement a system for your entire business operation. Smaller scale means faster go-lives. That faster delivery also means faster time to value.
Effectively, you have built the framework for your business with a modular ERP; then, you simply expand on that framework as the market demands and as your own resources become available.
Using best-of-breed technologies
Lastly, a modular ERP allows you to utilize best-of-breed vendors for specific functionality and integrate them quickly and easily relative to traditional ERPs. For example, you can avoid being pigeonholed into adoption poor-performing CRMs or supply chain technologies; you can get more value and meet your unique needs by selecting from a wider variety of these technologies instead.
Disadvantages
As with the adoption of any new technology, modular ERP adoption does come with some challenges. Be sure to consider them as you begin your ERP modernization efforts.
Access to APIs for integration
As mentioned earlier, modular ERPs are purpose-built to give you the ability to leverage best-of-breed functionality from several different vendors. Even so, integration presents some challenges. A modular ERP is designed to accommodate integration, but its success depends on your ability to access or create APIs that will ensure the fluid transfer of data from one system to another. Integration is critical for the overall optimal functioning of your system.
Upfront efforts for data governance
Data governance —ideally, ensuring one version of the truth exists across your system — is required for any ERP to truly succeed, modular ERPs included. But a modular ERP requires an even higher degree of rigor both at the point of implementation and as you add modules to your system, ensuring that your modules go live as smoothly as possible.
Incremental costs
Finally, there is the matter of cost. As anyone who has made home improvements knows, the upfront cost is less if you approach them in incremental steps. Painting the entire interior of a house all at once is a more expensive, resource-intensive effort up front; meanwhile, preparing and painting one room at a time may make the costs and effort more manageable.
The same holds true with technology: managing costs depends first on the requirements, your available resources and time. But the sum of all costs may be more when paid incrementally — even if those costs are easier to manage and yield better results over time.
In conclusion
So, is a modular ERP right for your business? You may find the amount of information in the marketplace is both overwhelming and paralyzing. In my experience helping leaders make significant technology decisions for their organizations, breaking your tasks down into smaller steps can help.
Begin by identifying your business needs. Ask peers in your industry what they recommend. Read as much as you can about companies with similar challenges and the technologies that have worked for them. As my father says, the right step is always the next step.
Next: MythBusters! We’ll tackle some of the common misperceptions about ERP and how you can address them. I look forward to sharing with you then.
